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RODE Microphones CEO Peter Freedman avoids putting his staff through the hoops of “horribly confronting” performance ratings. Photo: Mark KolbeWhen workplaces turned super competitive, human resources became inhumane resources to many who lost out, but a quiet revolution is taking place against the office politics of fear.
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In Sydney there is a company that treats all employees as equal.

International software company Retriever Communications in the northern beaches suburb of Frenchs Forest does not rank employees against one another. Nor are any excluded from management meetings.

Mary Brittain-White, who founded Retriever Communications 20 years ago, has rejected rankings and other extreme human resources management fads that come and go.

“All of that ranking stuff is a load of bollocks,” Brittain-White says.

When it comes to getting the best out of her 40 engineers and 10 support staff, she makes sure that all their ideas, including criticisms, are heard. In the US, there was more of a tendency for workers to be compliant with their bosses, which Brittain-White believes is counter to promoting innovation and creativity.

The flat management structure at Retriever Communications means all staff are welcome to meetings. There is no visible hierarchy in the office.

“I let anyone at any level attend meetings if they have a need,” Brittain-White says. “Only the people that find it relevant to what they are doing actually come up.”

But unlike some American companies including shoe vendor Zappos, her management approach is not purely consensual. Zappos​, owned by Amazon, has embraced a system called “holacracy​” which replaces the management hierarchy with a democratic system of self-managed teams.

“I’m not suggesting there is no leadership here, there has to be,” Brittain-White says.

“It is allowing people to express a view and then having someone who actually has to own the decision.

“It is important to me … to say to people you are not barred from this meeting, this is not about seniority and hierarchy. It is about getting things done.”

Australian companies including Retriever Communications avoid the extremes of human resources trends – everybody runs the company at one end, brutal rankings and top-down management hierarchy at the other.

When it comes to performance reviews, the focus for Brittain-White is on the quality of the conversation and setting career goals for the benefit of staff.

“It is for the employee to feel they are getting the level of feedback they need, rather than the business needing it,” she says.

“The individual gets very frustrated in terms of not having a career path planned, not having a formalised assessment.”

The so-called “rank and yank” approach tested and ultimately abandoned by Microsoft, General Electric and other companies in recent years resulted in the bottom 10 per cent of employees being culled.

While setting worker against worker might encourage competition between sales staff, Brittain-White believes it fails miserably when applied to creative types.

“Conflict is not the best way to get the best out of engineers. What they are looking for is a more harmonious environment and encouragement. They need that,” she said.

Anxiety over job security and rankings breeds internal competition and in worst cases, gaming and cheating of the assessment system.

Before founding her company, Brittain-White worked for many years in large corporations including IBM and Motorola in Silicon Valley.

“I came from high sales and everyone was competing with the other bastard,” she says.

“In a smaller business like mine where you know everyone personally, I have made two people redundant in 20 years. We are desperate to find people with programming skills, we are trying to keep them, not get rid of them.”

The approach to human resources management in larger corporates was more brutal in the US, where employees are more easily sacked at will.

In an apocryphal story, a former human resources manager at Netflix named Patty McCord reportedly convinced her boss Reed Hastings that he should re-evaluate everyone in the executive ranks by asking the question: would you hire the same person again today? Reed took McCord’s advice to heart and used it to oust her from her job after 20 years in his service.

Tighter regulation of unfair dismissal under workplace laws makes sackings more difficult in Australia. Even so, significant down-sizing in recent years has still led to brutal retrenchments.

The rhetoric of retaining and developing staff talent operates in sharp contrast to the cold efficiency of downsizing.

“You are valuable until a company decides it doesn’t need you,” says John Shields, professor of human resource management at the University of Sydney business school.

“When it doesn’t need you, it will move you out as quickly and clinically as possible.”

Since the global financial crisis, many companies have moved away from reward payments towards talent development and training.

“The performance pay side of things really did take a hiding because of the way that executive rewards were exposed during the GFC,” Shields says.

The recent move away from performance reviews – universally hated and often criticised as an empty ritual – has surprisingly also led to employees becoming less engaged according to new research.

Aaron McEwan from best practice company CEB, said its survey of 9500 employees and 300 heads of human resources managers found employees, particularly high performers, had become disengaged without performance reviews.

The study of staff and managers at global companies including those operating in Australia found the move away from performance ratings resulted in a 28 per cent drop in the productivity of high performers.

In tossing out the bureaucratic box-ticking exercise, the valuable conversation between employee and manager had also been sacrificed, leading to staff, particularly high performers, withering without constructive feedback, recognition, goal-setting or encouragement.

Academics like Shields say the performance review format needed to be improved instead of jettisoned to protect the valuable time for a conversation between staff and managers.

Roy Green, dean of the University of Technology Sydney business school, found Australia is lagging behind many other countries including the US and Japan when it comes to promoting workplace productivity and creativity.

“We are not good in Australia at engaging talent and creativity in the workforce,” he said.

Harsh culling techniques used in company downsizing do little to encourage the talent and confidence of staff that remain.

“They are characterised by a survivor syndrome in that they wonder why they are still there and will they be the next to go,” Green says.

“I think the evidence is now suggesting that a very authoritarian approach to managing and constructing your workforce is instilling approaches that are the very opposite of the kind you would like to see occur, which is greater collaboration, greater commitment to the ethos of the organisation, greater participation …

“If you have a workforce that is so alienated that they don’t do these things, you are compromising the future success of your organisation.”

Performance reviews had become so “bureaucratic, over bearing and intrusive” in recent years that they had failed to give employees a greater sense of autonomy or enable them to participate in the innovation and growth of an organisation. The performance review had also become the proxy for ongoing dialogue with the workforce.

“Performance reviews have a role as long as they are a servant and not a master of job performance,” Professor Green says.

“Some of the old ideas of authoritarian management are disappearing but we still have many managers who are not well trained for their roles, who are insecure and who feel they need to have control over everything.”

Professor of human resource management at the University of South Australia business school Carol Kulik says there were conflicting purposes of performance reviews, including rewarding high performers with higher pay and laying off the bottom performers.

The administrative and punitive side of the reviews had stifled the candidness needed in genuine conversations that encouraged development and had led to some people trying to game the system.

The “rank and yank” technique often created internal competition and conflict among staff.

She says about 20 per cent of the Fortune 500 companies in the US had some form of forced distribution system which put employees on a bell curve.

“A forced distribution system only works if you are going to have some reward or punishment to attach to the ratings. Otherwise you are creating turmoil for nothing,” Kulik says.

“We haven’t seen forced distribution being that popular in Australia and part of the reason for that is because we’ve historically had such a strong centralised industrial relations system where a much smaller percentage of people’s pay is based on individual performance. Most of it is based on the award rate.”

Companies like GE and Microsoft that had eliminated 10 per cent of staff saw good performers lost.

Peter Freedman, the chief executive officer at RODE Microphones in Sydney, China and the US, says he avoids putting his 150 Australian staff through the hoops of “horribly confronting” performance ratings and has kept good employees for 10 years or longer “because that’s how you get a good business because they know what they are doing”.

“What we do is ask them what the highlights of the year were and what they have achieved,” he says.

“If the company is doing really well, and we have had another cracker year, then I come out there and increase everybody’s wages by 10 per cent. If you are doing well, why wouldn’t you share it.

“And that’s a huge motivator, otherwise they see me driving around in my hot car and they aren’t getting anything.”

The business also has a very flat management structure.

“Everybody could articulate why we are doing what we are doing. And they are super proud how we are beating multi-billion dollar companies because we are fast,” Freedman says.

“The millions of microphones coming out of a place in Silverwater. It’s pretty awesome.”

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